UGA could avoid layoffs

Economists forecast rising tax collections

Posted: Friday, December 05, 2003

By Walter C. JonesMorris News Service

P. George Benson, dean of the Terry College of Business at the University of Georgia, addresses attendees at the 2004 Economic Outlook Luncheon held Thursday in Atlanta. The luncheon featured discussion of the annual economic forecast prepared by UGA's Selig Center for Economic Growth.

ATLANTA - Immediate layoffs at the University of Georgia and other state colleges may not be needed if state tax collections continue to improve, UGA economists said Thursday.

Layoffs are in the blueprint to cut spending by 5 percent at the university as its part of a contingency plan every state agency was ordered to prepare. But such drastic cuts might not be necessary during the current fiscal year, said Jeff Humphreys, director of the UGA Selig Center for Economic Growth, which prepared the forecast.

The forecast estimates tax collections will rise between 6 percent and 7 percent over the prior year through the remainder of the state's fiscal year, which ends June 30. Some cutting may still be required to keep the budget in balance, but not necessarily the full 5 percent in the contingency plans, Humphreys said.

The reason is that Georgia is more than doubling its pace of creating new jobs - most of them in Atlanta. Added jobs anywhere in the state translate into increased tax collections, an important issue in Athens where every third person holds a government post.

But if the November tax collections to be announced this afternoon contain unexpected bad news, layoffs would be the only way to achieve the full 5 percent cut, said George Benson, dean of UGA's Terry College of Business.

''I don't think it can be avoided,'' Benson said, adding that less-painful cuts had already been made.

Collections had started declining before Gov. Sonny Perdue took office in January, prompting him to propose a package of tax increases. Thursday, he told an audience of executives attending the economic forecast that he won't do that again.

Perdue began ordering spending cuts last summer because tax collections kept falling even after his tax package took effect. So he ordered each agency to cut spending 2.5 percent and prepare a plan for another 5 percent cut. Besides university layoffs, those second cuts would include the closing of state mental hospitals in Savannah and Columbus and early release of some prisoners.

Perdue said flatly Thursday, ''We're not closing any hospitals. ... We are not closing any prisons.''

He said some additional cuts will be made in next year's budget, but they aren't likely to be across-the-board cuts in the way the 5 percent contingency plans call for.

He asked every agency head to list its lowest-priority programs, and those would probably get the ax first. He didn't offer any specifics and dodged reporters seeking details from him.

Even without layoffs, job hunting in Athens probably will be harder.

The forecast predicts that this year's modest local job-creation pace of 1.1 percent will slow further to just 0.7 percent in 2004.

''We're likely to have a mediocre year in Athens,'' Humphreys said.

The possibility of cuts in the state budget prevents the university itself from adding employees. And the area's manufacturing jobs will continue to vanish to other countries.

Health care, a major employer in the region and generally a growth sector with the aging of the baby boom generation, is predicted to stall because of a huge deficit in the budget for Medicaid, the government insurance program for the poor, Benson said.

Construction, another strong sector for Athens in recent years, should cool because falling rents will keep tenants in apartments rather than buying new houses, he said.

Statewide, job creation will continue its quicker pace, with the three-quarters of new positions popping up in metro Atlanta.